Page 724 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

Glossary 709

preferred stock plan See phantom stock.
premium (insurance) Policy holder payment to insurance company in exchange for guarantee of
paying specified payments.
premium-priced stock options Options with an exercise price set above market value at grant date.
premium (security) The difference between market value and face value when market value is
higher.
prerequisites The minimum educational and/or experience requirements needed to qualify for a
position.
preretirement counseling Assisting individuals in preparing for retirement by helping them esti-
mate expenses and income as well as answering questions about company benefit programs.
prescription drugs Medications that can be obtained only with a doctor’s authorization.
prescription drug plan Reimbursement to participants for some portion of the expense of prescrip-
tion drugs.
present value Future value of an asset discounted to the current date based on compound increase in
the asset’s value over time.
present-value method Bringing a targeted future gain in stock to its present value to determine the
number of shares to grant.
presiding director Member of the board of directors who chairs a particular meeting of the board.
Position is often rotated among the directors.
pretax earnings Earnings before taxes. Also called income before taxes.
pretax earnings to sales ratio Earnings before taxes divided by net sales, indicating the portion of
profit controlled by management.
pretend plans See phantom stock plans.
price book value ratio Market price of a share of common stock divided by a share of book value. A ratio
in excess of 1 suggests a growth company; a ratio of less than 1 suggests a mature or declining company.
price dividend ratio See yield.
price earnings projected growth ratio Price earnings ratio divided by projected multiyear growth
rate, indicating the extent to which a company is over- or undervalued (less than 1 being undervalued,
and more than 1 overvalued).
price earnings ratio (PE) Common stock price divided by earnings per share.
primary market Stocks sold to investors through an IPO (initial public offering) by a company.
principal Either a purchaser or seller in a transaction.
principal shareholder An investor who controls 10 percent or more of a company’s common stock
or has the ability to at least significantly influence company decisions.
private banking Typically a separate unit of a bank that provides investment services for high
net-worth individuals.
private company Registered shares unavailable to the public.
private equity Capital of nonpublic companies or a portion of public-listed companies invested by
venture capitalists.
private letter ruling An IRS interpretation of the IRC that may be relied upon only by the
company that requested the interpretation.
privately held company See private company.
private placement Security sale without public offering.
private sector Companies owned by individuals.